Aluminium prices set to rebound as global deficit looms: Crisil

“Limited capacity additions over the next five years will be key to the rebound in aluminium prices. Pertinently, China, which added over 16 million tonne (MT) of capacity over the past decade, is likely to take a pause to reduce emissions,” the report said.

According to Hetal Gandhi, Director, CRISIL Research, “Green investments across major economies will lead to a strong uptick in demand for aluminium, but global capacity addition is expected to fall from 20 MT during the past decade to just 3-4 MT over the next five years. The robust demand growth, rationalised supply addition and healthy utilisation levels point to multi-year deficits of 0.5-1.2 MTPA in the global primary aluminium market post 2023.”

Domestic smelters have also expanded aggressively over the past decade, adding over 2.4 MT of capacity, registering an annualised growth of 9 percent till fiscal 2022, the report pointed out.

However, it said that domestic demand has seen slower growth of 4 percent during the period, driven by power sector capex and cable conductor exports, with the excess produce finding its way into export markets. India exports 58-62 percent of its primary aluminium production, it added.

“Despite the large share of exports, domestic primary aluminium manufacturers are expected to add only 1.4 MT of smelting capacity, goaded by the looming global deficit. Investments in upstream alumina expansions to add over 6.4 MT of refinery capacity will lead to better cost control translating into higher profits. All these capacity expansions over the next five fiscals will cost Rs 45,000 crore,” said Koustav Mazumdar, Associate Director, CRISIL Research

According to Crisil, with domestic supply outgrowing demand, domestic smelters will continue to export nearly 60 percent of their output over the next five fiscals.